Report of independent auditors

Report of independent auditors To the Board of Trustees of The Metropolitan Museum of Art: We have audited the accompanying financial statements of The Metropolitan Museum of Art (the Museum ), which comprise the statements of financial position as of June 30, 2018 and 2017, and the related statements of activities for the year ended June 30, 2018 and of cash flows for the years ended June 30, 2018 and 2017. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Museum s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Museum s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Metropolitan Museum of Art as of June 30, 2018 and 2017 and the changes in its net assets for the year ended June 30, 2018 and its cash flows for the years ended June 30, 2018 and 2017 in accordance with accounting principles generally accepted in the United States of America. Other Matter We previously audited the statement of financial position as of June 30, 2017, and the related statements of activities and of cash flows for the year then ended (not presented herein), and in our report dated November 14, 2017, we expressed an unmodified opinion on those financial statements. In our opinion, the information set forth in the accompanying summarized financial information as of June 30, 2017 and for the year then ended is consistent, in all material respects, with the audited financial statements from which it has been derived. New York, New York November 13, 2018 49

The Metropolitan Museum of Art Statements of Financial Position June 30, 2018 and 2017 (in thousands) 2018 2017 Assets: Cash (Note A)... $ 34,282 $ 53,777 Receivable for investments sold... 2,092 2,896 Retail inventories, net (Note A)... 9,055 7,114 Accounts receivable and other assets (Note B)... 16,127 15,700 Contributions receivable (Note C)... 134,012 202,603 Split interest arrangements (Notes G and H)... 69,117 72,316 Investments (Notes A and G)... 3,728,843 3,433,485 Fixed assets, net (Notes A and E)... 370,825 393,462 Collections (Note A)... total assets... $ 4,364,353 $ 4,181,353 Liabilities: Payable for investments purchased... $ 2,552 $ 2,303 Accounts payable and accrued expenses... 31,697 35,757 Accrued salaries and benefits... 25,722 27,886 Deferred income (Note A)... 6,152 5,329 Notes payable (Note J)... 12,365 21,675 Annuity and other split interest obligations (Notes G and H)... 14,803 18,588 Asset retirement obligations (Note N)... 9,694 9,715 Pension and other accrued retirement obligations (Note I)... 178,513 207,759 Loans payable and other long-term liabilities (Notes G and K)... 410,849 418,044 total liabilities... 692,347 747,056 Net assets: Unrestricted (Notes A and O)... 964,278 839,341 Temporarily restricted (Notes A and O)... 1,617,830 1,535,971 Permanently restricted (Notes A and O)... 1,089,898 1,058,985 total net assets... 3,672,006 3,434,297 total liabilities and net assets... $ 4,364,353 $ 4,181,353 50 The accompanying notes are an integral part of the financial statements.

The Metropolitan Museum of Art Statement of Activities for the year ended June 30, 2018, with summarized financial information for the year ended June 30, 2017 (in thousands) Unrestricted Temporarily Permanently operating revenue and support: Admissions and membership... $ 76,798 $ $ $ 76,798 $ 70,218 Gifts and grants... 31,700 35,648 67,348 84,634 Operating appropriations from the City of New York (Note A)... 25,446 25,446 27,667 Endowment support for current activities (Note G)... 78,759 24,426 103,185 113,374 Retail and other auxiliary activities (Note P)... 88,117 88,117 87,547 Other income... 8,357 8,357 6,470 Net assets released from donor restrictions to fund operating expenses... 55,234 (55,234) total revenue and support 364,411 4,840 369,251 389,910 expenses: Curatorial... 129,406 129,406 124,077 Education and Libraries... 15,422 15,422 14,778 Development and membership... 22,980 22,980 21,713 Operations... 103,815 103,815 98,070 General administration... 33,089 33,089 46,403 Retail and other auxiliary activities (Note P)... 88,275 88,275 90,379 total expenses... 392,987 392,987 395,420 Transfer of non-operating funds... 20,326 (277) 20,049 18,113 change in net assets from operating activities (8,250) 4,563 (3,687) 12,603 non-operating Museum-designated and donor-restricted gifts... 5,943 83,804 89,747 39,172 Endowment gifts (includes quasi-endowment)... 8,748 2,005 28,280 39,033 106,501 Endowment support for current activities (Note G)... 22,305 25,121 47,426 33,580 Investment return in excess of current support (Note G)... 68,204 108,867 236 177,307 241,691 Change in value of split interest agreements (Note H)... 436 449 1,147 2,032 1,758 Depreciation and non-capitalized expenditures (Note E)... (48,348) (48,348) (50,700) Interest expense on bonds and interest rate swaps (Notes A and K) (12,793) (12,793) (12,155) Realized and change in unrealized gains on 2015 bond proceeds... 12,106 12,106 13,235 Transfer of designated non-operating funds to operating and other... 5,584 (24,988) 1,250 (18,154) (17,813) Net assets released from donor restrictions... 38,691 (38,691) Change in net assets before collection items not capitalized and other adjustments... 92,626 161,130 30,913 284,669 367,872 Purchases of art (Note D)... (89,481) (89,481) (25,507) Proceeds from sales of art... 2,115 2,115 13,407 Net assets released from donor restrictions to fund acquisitions of art... 81,386 (81,386) Pension-related changes other than NPPC (Note I)... 33,122 33,122 28,626 Change in fair value of interest rate exchange agreements (Notes G and K)... 7,284 7,284 14,076 change in net assets.... $ 124,937 $ 81,859 $ 30,913 $ 237,709 $ 398,474 net assets at the beginning of the year.... $ 839,341 $ 1,535,971 $ 1,058,985 $ 3,434,297 $ 3,035,823 net assets at the end of the year... $ 964,278 $ 1,617,830 $ 1,089,898 $ 3,672,006 $ 3,434,297 Total 2018 Total 2017 The accompanying notes are an integral part of the financial statements. 51

The Metropolitan Museum of Art Statements of Cash Flows for the years ended June 30, 2018 and 2017 (in thousands) 2018 2017 cash flows from operating activities Change in net assets... $ 237,709 $ 398,474 Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation and amortization... 51,361 54,609 Loss on disposal of fixed assets... 174 Receipt of contributed securities and other assets... (21,599) (18,335) Proceeds from the sale of contributed securities... 13,171 12,108 Contributions for capital expenditures... (10,765) (28,468) Contributions for long-term investment... (82,737) (34,587) Allowance and discount on contributions receivable... 5,398 15,402 Net realized and unrealized (gains)/loss... (315,730) (380,861) Acquisitions and sales of art, net... 87,366 12,100 Interest rate exchange agreements... (7,284) (14,076) Asset retirement obligations... (21) (506) Pension and other accrued retirement obligations... (33,122) (28,626) Changes in assets and liabilities: Retail inventories, net... (1,941) 2,597 Accounts receivable and other assets... (427) 3,966 Contributions receivable... 63,193 (73,486) Split interest arrangements... 3,199 (2,185) Accounts payable and accrued expenses... (6,184) (5,080) Accrued salaries and benefits... (2,164) 1,771 Deferred income... 823 (44) Annuity and other split interest obligations... (3,785) 328 Pension and other accrued retirement obligations... 3,876 6,825 Net cash used in operating activities... (19,663) (77,900) cash flows from investing activities Investment in fixed assets... (28,099) (36,941) Proceeds from sales of investments... 763,601 742,681 Purchases of investments... (742,104) (635,529) Acquisitions of art... (87,893) (28,035) Proceeds from sales of art... 2,115 13,407 Net cash (used in) provided by investing activities... (92,380) 55,583 cash flows from financing activities Proceeds from the sale of contributed securities... 8,356 6,648 Contributions for capital expenditures... 10,765 28,468 Contributions for long-term investment... 82,737 34,587 Payment of notes payable... (12,876) (50,727) Proceeds from notes payable... 3,566 49,880 Net cash provided by financing activities.... 92,548 68,856 Net (decrease)/increase in cash... (19,495) 46,539 Cash, beginning of the year... 53,777 7,238 cash, end of the year... $ 34,282 $ 53,777 Supplemental information: Cash paid in the year for interest... $ 13,197 $ 12,452 Non-cash investing activity: Increase/(decrease) in fixed asset additions included in accounts payable and accrued expenses... 536 (2,892) Increase/(decrease) in acquisition of art included in accounts payable and accrued expenses... 1,588 (2,528) Receipt of contributed securities and other assets.............................................. (21,599) (18,335) 52 The accompanying notes are an integral part of the financial statements.

The Metropolitan Museum of Art Notes to Financial Statements June 30, 2018 and 2017 A. Summary of Significant Accounting Policies Nature of Business - The Metropolitan Museum of Art (the Museum ) is a not-for-profit cultural institution founded in 1870 and is dedicated to the collection, preservation, study, and exhibition of art. The Museum serves a local and international audience from its New York City location. The Museum s collections comprise nearly two million works of art from ancient, medieval, and modern times, and from all areas of the world. They offer a survey of considerable breadth of art from the ancient civilizations of Asia, Africa, South America, the Pacific Islands, Egypt, the Near East, and Greece and Rome to the present time. The Museum s collections include European paintings, medieval art and architecture, arms and armor, prints, photographs, drawings, costumes, musical instruments, sculpture, textiles, and decorative arts from the Renaissance to the present time as well as one of the foremost collections of American art in the world. The Museum also maintains some of the most comprehensive art and architecture libraries in the United States. The collections are maintained for public exhibition, education, and research in furtherance of public service, rather than for financial gain. Basis of Presentation - The Museum classifies all financial transactions into three net asset categories in accordance with applicable donor-imposed restrictions: permanently restricted, temporarily restricted, and unrestricted. Permanently restricted net assets have donor-imposed restrictions that stipulate that the corpus of the gifts be maintained in perpetuity, but permit the Museum to expend net income and gains earned on contributed assets for either specified or unspecified purposes (Note O). Temporarily restricted net assets carry donor-imposed restrictions on the expenditure of the contributed assets. Temporary restrictions may expire with the passage of time, as a result of actions taken by the Museum that fulfill donors restrictions, or as a result of expenditures incurred that could have been charged to temporarily restricted assets. When temporarily restricted net assets are released from restrictions, they are transferred to unrestricted net assets and shown as Net assets released from donor restrictions, Net assets released from donor restrictions to fund operating expenses, and Net assets released from donor restictions to fund acquisitions of art in the Statement of Activities. Transfers from temporarily restricted to unrestricted net assets occur even if the contributions are received and spent within the same year. In addition, earnings on certain donor-restricted endowment funds are classified as temporarily restricted, pursuant to the New York Prudent Management of Institutional Funds Act (NYPMIFA), until appropriated for expenditure by the Board of Trustees (Note O). Unrestricted net assets are not restricted by donors. A portion of the unrestricted net assets is designated by the Museum for specific purposes, including long-term investment, leasehold improvements, and various curatorial activities. Measure of Operations - The Museum includes in its measure of operations all revenue and expenses that are integral to its programs and supporting activities, net assets released from donor restrictions to support operating expenditures, and transfers from Board-designated and other non-operating funds to support current operating activities. The measure of operations includes support for operating activities from both restricted net assets and unrestricted net assets designated for long-term investment (the donor-restricted and quasi-endowment) according to the Museum s spending policy, which is detailed in Note O. The measure of operations excludes endowment support for non-operating and restricted operating activities; investment return in excess of (less than) amounts made available for current support; additions to restricted and designated net assets; pension-related changes other than net periodic pension cost ( NPPC ); changes in net assets of split interest agreements, after providing for any operating revenue or support; changes in net assets pertaining to acquisition and deaccession of collection items, and related insurance settlements; fees received for art-lending activities; depreciation of capital expenditures, except for those related to auxiliary activities and acquired computer systems and equipment; gains/losses on disposal or sale of fixed assets; non-capitalized expenditures; liability recognition for legal obligations to perform asset retirement activity; the entire effect of interest rate swaps; interest expense related to taxable borrowings and certain miscellaneous charges and revenue unrelated to operating activities. Collections - In conformity with accounting policies generally followed by art museums, the value of the Museum s collections has been excluded from the Statement of Financial Position, and gifts of art objects are excluded from revenue in the Statement of Activities. Purchases of art objects by the Museum are recorded as decreases in net assets in the Statement of Activities. Pursuant to state law and Museum policy, proceeds from the sale of art and related insurance settlements are recorded as temporarily restricted net assets for the acquisition of art. Cash and Cash Equivalents - This represents operating cash balances. The Museum considers all highly liquid investments with a maturity of three months or less from the time of purchase to be cash or cash equivalents. Cash equivalents are recorded at cost plus accrued interest which approximates fair value. Additional information on cash receipts and payments is presented in the Statement of Cash Flows. Retail Inventories, net - Retail inventories are valued at the lower of cost or market value. Cost is determined using the average unit cost method of accounting. The Museum annually reviews the value of the items in its inventory for obsolescence. In fiscal years 2018 and 2017 the amount of inventory written down due to obsolescence was $0.5 million and $0.4 million, respectively. Investments - Investments in short-term instruments, fixed income securities, and equity securities are valued at the last sale price on the principal exchange, and in the absence thereof, such securities are valued at the closing bid quotation for long positions and at the closing ask quotation for short positions. The fair value of investments in equity funds, hedge funds, private equity, and real asset funds are determined based on the net asset values provided by the external investment managers of the underlying funds as a practical expedient to determine the fair value. Certain of these investments, particularly those investing in private equity and real assets, hold investments in non-marketable securities for which there are no readily obtainable values. Values for these investments are provided by the investment manager and may be based on appraisals, obtainable prices for similar assets, or other estimates. The assumptions and methods used to arrive at these valuations are reviewed by the Museum s Investments Office. Due to the inherent uncertainty of valuations, the estimated fair values may differ significantly from the values that would have been used had a ready market for such investments existed or had such investments been liquidated, and those differences could be material. Purchase and sale of short-term instruments, fixed income, and equity securities are reflected on a trade date basis. Gains and losses on the sale of securities are based on the difference between the sale price and average historical cost basis, where such basis represents the cost of securities purchased or the fair value at the date of receipt for securities received by donation. Interest income is recorded on an accrual basis and dividend income is recorded on the ex-dividend date. Investments denominated in foreign currency are translated at the year-end spot rate. Derivative Instruments - The Museum records derivative instruments (e.g., interest rate swap agreements) at fair value in accordance with Derivatives and Hedges Accounting and Fair Value Accounting guidance. The change in fair value during the reporting period together with the net effect of the interest rate swap is recognized below the operating measure. Fixed Assets - The building occupied by the Museum on Fifth Avenue is owned by the City of New York (the City ) and is leased free of charge to the 53

Museum pursuant to a capital lease. The value of the original building is not included on the Statement of Financial Position since it is fully depreciated. Certain building and gallery improvements are paid for by the City and are included in fixed assets. Contributions from the City for assets that are not fully depreciated are reflected in temporarily restricted net assets. The Museum has adopted a policy of implying a time restriction that expires over the useful life of long-lived assets acquired or constructed with contributions restricted for that purpose. Building and leasehold improvements are capitalized and reported as fixed assets. The Met Cloisters in Fort Tryon Park and other buildings that are the property of the Museum are included as fixed assets and are stated at cost. Amortization of leasehold improvements of the Fifth Avenue building and depreciation of buildings, improvements, and equipment are computed on a straight-line basis over the estimated useful lives of the assets. Amortization of leasehold improvements related to auxiliary activities is computed on a straight-line basis over the shorter of the remaining term of the lease or estimated useful lives of the assets. Long-lived assets such as fixed assets are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable. Deferred Income - Membership dues received from individuals and corporations pertaining to all membership categories are recognized as revenue upon receipt for the portion of the dues that are considered a contribution to the Museum, while the portion of the dues that relates to the service the Museum will provide the Member is recognized as revenue ratably over the term of the membership period, up to 24 months. Amounts not yet earned by the end of the fiscal year are reported as deferred income. Contributions, Contributed Utilities, and Support - Contributions, including cash, in-kind contributions, and unconditional promises to give (pledges), are recorded as revenue in the period in which they are received. Conditional contributions are recognized as revenue when the conditions on which they depend have been substantially met. Contributions are recorded at fair value, and in the case of pledges, net of estimated uncollectible amounts, and discounted if due in over one year. Several utility costs of the Museum are paid for by the City. The value of such costs is reported as revenue and a corresponding amount is included as an expense in the Statement of Activities, totaling $14.6 million and $13.5 million in fiscal years 2018 and 2017, respectively. The City also provides funds for guardianship and maintenance, including reimbursement for salaries, social security, and pension contributions. The Museum has volunteers who provide assistance in various areas of the Museum. Such contributed services do not meet the criteria for recognition of contributed services contained in generally accepted accounting principles and, accordingly, are not reflected in the accompanying financial statements. Bond Issuance Costs - Bond issuance costs, which represent costs to obtain financing for infrastructure projects for the Museum, are currently included in loans payable and other long-term liabilities on the Statement of Financial Position; amortization of these costs extends over the life of the applicable loan. Functional Allocation of Expenses - The costs of providing Museum programs and supporting services are shown in Note L. Programs include curatorial activities, conservation, exhibition, education, libraries, public services, and auxiliary activities. Curatorial costs include gallery maintenance and renovation, collections care and maintenance, scholarly research and publications, and special exhibitions. Supporting services include fundraising and management and general administrative costs. Fundraising costs include expenses associated with individual and corporate memberships, annual appeals, benefit events, the capital campaign, and other fundraising efforts. Management and general administrative costs include expenses for executive management, financial administration, information systems, human resources, legal services, and investment management fees. Depreciation, interest, utilities, building maintenance, security, and other operating costs are allocated to the above program areas and supporting services. Such expenses are allocated based upon various methodologies including square footage and security guard posts. Advertising - Advertising expenses pertaining to retail activities, mostly attributable to the production and distribution of catalogues, amounted to $4.7 million and $4.3 million in fiscal years 2018 and 2017, respectively. Other advertising expenses incurred primarily in support of special exhibitions, the permanent collection, and live arts totaled $4.1 million and $3.5 million in fiscal years 2018 and 2017, respectively. All advertising is expensed as incurred. Interest Expense - Interest on tax-exempt debt, including commitment fees, is charged to operating expenses. Interest expense related to interest rate swap agreements and the Series 2015 Bonds interest is charged to non-operating activities, as the proceeds are used solely to fund infrastructure projects. Income Tax Status - The Museum is a nonprofit organization exempt from income tax under Section 501(c)(3) of the Internal Revenue Code. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles accepted within the United States ( US GAAP ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Summarized Comparative Information - The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States. Accordingly, such information should be read in conjunction with the Museum s financial statements for the year ended June 30, 2017, from which the summarized information was derived. Reclassifications - Certain amounts in the 2017 statements have been reclassified to conform to the current year presentation. New Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs - Contracts with Customers (Subtopic 340-40). This standard implements a single framework for recognition of all revenue earned from customers. This framework ensures that entities appropriately reflect the consideration to which they expect to be entitled in exchange for goods and services by allocating transaction price to identified performance obligations and recognizing revenue as performance obligations are satisfied. Qualitative and quantitative disclosures are required to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For the Museum, this standard is effective for fiscal year 2019. The Museum is evaluating the impact of this standard on the financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under this guidance, lessees will need to recognize the following for all leases (with the exception of leases with a term of twelve months or less) at the commencement date: (a) a lease liability, which is a lessee s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The guidance requires a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expire before the earliest comparative period presented. A full retrospective transition approach is not permitted. This new standard is effective for fiscal years beginning after December 15, 2018 (fiscal year 2020 for the Museum), with early application permitted. The Museum is evaluating the impact of this standard on the financial statements. 54

In August 2016, the FASB issued ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, which makes targeted changes to the not-for-profit financial reporting model. Under the new ASU, the existing three-category classification of net assets (i.e. unrestricted, temporarily restricted, and permanently restricted) will be replaced with a model that combines temporarily restricted and permanently restricted into a single category called net assets with donor restrictions. Differences in the nature of donor restrictions will be disclosed in the notes, with an emphasis on how and when the resources can be used. The guidance for classifying deficiencies in endowment funds ( underwater endowments ) and on accounting for the lapsing of restrictions on gifts to acquire property, plant, and equipment have also been clarified. New disclosures will highlight restrictions on the use of resources that make otherwise liquid assets unavailable for meeting near-term financial requirements. Entities will be required to disclose (on the face of the statement or in notes) the extent to which the balance sheet comprises financial assets, the extent to which those assets can be converted to cash within one year, and any limitations that would preclude their current use. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal year 2019 for the Museum), with early application permitted. This ASU should be applied on a retrospective basis in the year that the ASU is first applied. The Museum is evaluating the impact of this standard on the financial statements. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. The amendments in this update are effective for fiscal years beginning after December 15, 2018 (fiscal year 2020 for the Museum), with early adoption permitted. The Museum is evaluating the impact of this standard on the financial statements. In June 2018, the FASB issued ASU 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. The amendments in this update provide a framework for evaluating whether grants should be accounted for as exchange transactions or as nonexchange transactions. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal year 2019 for the Museum). This ASU should be applied on a modified prospective basis; however, retrospective application is permitted. The Museum is evaluating the impact of this standard on the financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removed, modified, and added additional disclosure requirements on fair value measurements in Topic 820. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain amendments will be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments will be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Museum is evaluating the impact of this standard on the financial statements. B. Accounts Receivable and Other Assets Accounts receivable and other assets consist of (in thousands): June 30, 2018 June 30, 2017 Accounts receivable, net of allowance of $963 and $1,019 for FY18 and FY17, respectively... $ 5,069 $ 3,989 Prepaid expenses and other... 6,938 7,867 Taxes receivable... 2,655 2,733 Dividends and interest receivable... 1,465 1,111 Total... $ 16,127 $ 15,700 C. Contributions Receivable Unconditional promises to contribute to the Museum are recorded as contributions receivable at the present value of future cash flows, net of an allowance for uncollectibility. The present value discount rate ranged from 4.25% to 5% for new contributions receivable at June 30, 2018. As of June 30, 2018, approximately 39% of gross contributions receivable is due from three donors. As of June 30, 2017, approximately 51% of gross contributions receivable was due from five donors. During fiscal year 2018, the Museum received a conditional promise to give of $1 million. As of June 30, 2018 those conditions have not been met and therefore the revenue is not reflected in the financial statements. Contributions are expected to be realized as follows (in thousands): June 30, 2018 June 30, 2017 Less than one year... $ 58,345 $ 120,789 Between one and five years... 43,343 57,742 Over five years... 64,800 51,150 Total... 166,488 229,681 Less: Adjustments and allowance for uncollectibility... (4,074) (4,289) Discount for present value... (28,402) (22,789) Net... $ 134,012 $ 202,603 55

D. Acquisitions of Art Acquisitions of art were funded from the following sources (in thousands): 2018 2017 Gifts of cash and securities... $ 58,928 $ 14,291 Gains and income from long-term investment: For designated curatorial departments... 10,070 5,465 Undesignated as to curatorial department... 11,606 4,207 Proceeds from fine arts insurance and the sale of art... 8,877 1,544 Total... $ 89,481 $ 25,507 E. Fixed Assets Fixed assets consist of (in thousands): June 30, 2018 June 30, 2017 Estimated Useful Lives in Years Land... $ 1,015 $ 1,015 N/A Buildings and improvements... 38,718 41,644 20 40 Leasehold improvements, auxiliary activities... 36,804 37,410 4 40 Leasehold improvements, Fifth Avenue building... 990,099 969,204 5 30 Machinery and equipment... 67,099 65,982 3 20 Total... 1,133,735 1,115,255 Less accumulated depreciation... (762,910) (721,793) Net... $ 370,825 $ 393,462 The above amounts include construction in progress of $55.5 million and $40.1 million at June 30, 2018 and 2017, respectively. Depreciation expense was $51.3 million and $54.5 million for fiscal years 2018 and 2017, respectively. Pursuant with the Museum s policy regarding its measure of operations, $4.9 million and $6.6 million were charged to operating activities in fiscal years 2018 and 2017, respectively, while $46.4 million and $47.9 million were charged to non-operating activities in fiscal years 2018 and 2017, respectively. In fiscal year 2018, $10.2 million of fixed assets with a net book value of $0.0 million were written off. In fiscal year 2017, $31.0 million of fixed assets with a net book value of $0.2 million were written off. Interest expense of $0.6 million was capitalized and included in fixed assets on the Statement of Financial Position in fiscal year 2017. There was no capitalized interest in fiscal year 2018. Fixed assets and construction in progress include $143.0 million of property contributed and funded by the City since 1990, of which $4.2 million and $6.0 million were received during the fiscal years ended June 30, 2018 and 2017, respectively. F. RESTRUCTURING CHARGES During the year ended June 30, 2016, the Museum extended a Voluntary Retirement Program ( VRP ) to Museum employees age 55 or older with at least 15 years of service. The applications for the VRP were accepted by the Museum and packages fully executed in fiscal year 2017. Involuntary personnel reductions were also completed in 2017. Expenses for severance and related charges of $0.08 million and $10.8 million associated with the voluntary and involuntary initiatives were recorded in the operating section of the Statement of Activities for the years ended June 30, 2018 and 2017, respectively. As of June 30, 2018, an outstanding liability of $0.03 million for severance and related charges was included in accounts payable and accrued expenses on the Statement of Financial Position. G. Investments The Museum s investments include assets held as part of the Museum s long-term portfolio, assets to be used for capital projects, and assets held for other miscellaneous purposes. The total cost of the investment portfolio was $3,140 million and $2,943 million as of June 30, 2018 and 2017, respectively. The Museum had approximately $671.7 million and $560.1 million in unfunded capital commitments primarily related to private equity and real asset funds as of June 30, 2018 and 2017, respectively. For investments within the long-term portfolio, the Museum aims to maintain a diversified portfolio that is designed to provide a stream of earnings for current use, while maintaining the purchasing power of assets in perpetuity. Investment objectives and policies are established by the Museum s Trustee Investment Committee and are undertaken in partnership with external investment managers. The investments held in the Museum s long-term portfolio consist of cash, cash equivalents, public equities, fixed income securities, hedge funds, private equity funds, and real asset funds. The Museum also invests in short-term and fixed income investments to finance various capital projects. In February 2015, the Museum completed a bond issuance totaling $250 million ( Series 2015 Bonds ) in order to finance various infrastructure projects over a ten-year period. Until they are used to fund these capital projects, the Museum has invested the proceeds from such bond issuance in U.S. Treasuries and a fund of hedge funds. Please refer to Note K for details related to the Series 2015 Bonds. 56

The following table presents the Museum s investments listed by their intended use for the years ended June 30 (in thousands): 2018 Fair Value 2017 Fair Value Held within the long-term portfolio Short-term investments... $433,185 $283,871 Fixed income... 97,319 99,820 Equities... 531,738 558,879 Equity funds... 682,786 685,038 Hedge funds... 782,464 693,135 Private equity funds... 474,253 427,941 Real asset funds... 465,624 401,085 Subtotal... 3,467,369 3,149,769 Held for capital projects Short-term investments... 25,985 20,793 Fixed income... 43,625 61,067 Fund of hedge funds... 188,498 180,154 Subtotal... 258,108 262,014 Other miscellaneous purposes Subtotal... 3,366 21,702 total investments... $3,728,843 $3,433,485 Fair values assigned to these investments may differ significantly from the fair values that would have been used had a ready market for the investments existed, and such differences could be material to the Museum s financial statements. In accordance with the authoritative guidance on fair value measurements and disclosures under US GAAP, the Museum discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based on unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based on unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of the fair value hierarchy under the guidance are as follows: Level 1 Quoted market prices for identical instruments in active markets. Level 1 assets include cash, cash equivalents, bonds, and equity securities actively traded on recognized exchanges both domestic and foreign. These investments are freely tradable and are valued based on quoted prices from active markets. Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, observable inputs other than quoted prices, inputs derived principally from or corroborated by observable market data by correlation or other means. Level 2 assets primarily consist of funds that invest in exchange traded equity, fixed income securities, and derivatives. The receipt of information regarding underlying holdings generally is less frequent than assets classified as Level 1. Valuations are based on quoted prices or other significant observable inputs. The Investments Office performs a number of procedures to support the reasonableness of the valuation of these investments. Level 3 Valuation models in which significant inputs are unobservable or where there is little, if any, market activity. An investment s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes observable requires significant judgment by the Museum. The Museum considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Museum s perceived risk of that investment. The Museum uses the Net Asset Value ( NAV ), provided by external investment managers, as a practical expedient to determine the fair value of all the underlying investments which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. The Museum reviews these valuations in a number of ways, including but not limited to, assessing the valuation methodologies employed by each manager, reviewing the footnotes related to valuation in audited financial statements, and evaluating the performance of each investment relative to market and investment-specific data. For such investments, the Museum applies the guidance outlined in Disclosure for Investments in Certain Entities that Calculated Net Asset Value per share (or its equivalent), which does not require these investments to be categorized within the fair value hierarchy. For investments in funds that are not valued based on the practical expedient, the Museum considers several factors in appropriately classifying these investment funds in the fair value hierarchy. An investment is generally classified as Level 2 if the Museum has the ability to withdraw its investment from the investment fund at the measurement date. An investment is generally classified as Level 3 if the Museum does not have the ability to withdraw its investment from the investment fund, such as investments in private investment funds, side pockets, or funds with suspended withdrawals imposed. 57

Fair Value Measurements The following tables present the financial instruments as stated on the Statement of Financial Position, by caption and by level within the valuation hierarchy as of June 30, 2018 and 2017 (in thousands): Assets and Liabilities at Fair Value as of June 30, 2018 Investments valued using Level 1 Level 2 Level 3 the practical expedient Total Split interest arrangements... $ 13,915 $ 10,456 $ 44,746 $ $ 69,117 investments: Equities... 481,174 50,563 1 531,738 Fixed income Government bonds... 67,599 67,599 Corporate debt... 23,565 4 23,569 Mortgage-backed... 34,593 34,593 Other... 15,183 15,183 Short-term investments... 462,386 462,386 Equity funds... 682,786 682,786 Hedge funds... 782,464 782,464 Private equity funds... 474,253 474,253 Real asset funds... 465,624 465,624 Fund of hedge funds held for capital projects... 188,498 188,498 Other investments... 150 150 Total investments... 943,710 191,503 5 2,593,625 3,728,843 total assets... $ 957,625 $ 201,959 $ 44,751 $ 2,593,625 $ 3,797,960 liabilities: Annuity and other split interest obligations... $ 14,803 $ 14,803 Interest rate exchange agreements... $ 27,358 27,358 total liabilities... $ 27,358 $ 14,803 $ 42,161 Assets and Liabilities at Fair Value as of June 30, 2017 Investments valued using Level 1 Level 2 Level 3 the practical expedient Total Split interest arrangements... $ 14,738 $ 13,780 $ 43,798 $ $ 72,316 investments: Equities... 502,441 56,437 1 558,879 Fixed income Government bonds... 90,579 90,579 Corporate debt... 21,660 9 21,669 Mortgage-backed... 34,953 34,953 Other... 13,686 13,686 Short-term investments... 304,695 304,695 Equity funds... 685,038 685,038 Hedge funds... 693,135 693,135 Private equity funds... 427,941 427,941 Real asset funds... 401,085 401,085 Fund of hedge funds held for capital projects... 180,154 180,154 Other investments... 681 20,990 21,671 Total investments... 807,817 217,315 21,000 2,387,353 3,433,485 total assets... $ 822,555 $ 231,095 $ 64,798 $ 2,387,353 $ 3,505,801 liabilities: Annuity and other split interest obligations... $ 18,588 $ 18,588 Interest rate exchange agreements... $ 34,642 34,642 total liabilities... $ 34,642 $ 18,588 $ 53,230 Included in the June 30, 2017 other investments is a gifted real estate property valued based on an independent appraisal using the income capitalization approach. 58

For the years ended June 30, the Museum had the following investments which represented more than 5% of net assets: Fair Value (in thousands) 2018 2017 % of NAV Fair Value (in thousands) % of NAV JP Morgan US Government Money Market Agency Share fund... $446,283 12.15% $291,070 8.47% Fund of hedge funds held for capital projects... $188,498 5.13% $180,154 5.24% The following table includes a roll forward of investments classified within Level 3 of the fair value hierarchy for the year ended June 30, 2018 (in thousands). The classification of a financial instrument within Level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement: Beginning Balance as of June 30, 2017 Net Realized and Unrealized Gains/(Losses) Transfers Into Level 3 Transfers (Out) of Level 3 Sales and Settlements Ending Balance as of June 30, 2018 Purchases investments: Equities... $ 1 $ 1 Fixed income... Corporate debt... 9 (3) (2) 4 Other investments.... 20,990 (2,820) (18,170) total investments... $ 21,000 $ (2,823) $ $ $ $(18,172) $ 5 Changes in Unrealized Gains/(Losses) Relating to Investments Held as of June 30, 2018 The following table includes a roll forward of investments classified within Level 3 of the fair value hierarchy for the year ended June 30, 2017 (in thousands). The classification of a financial instrument within Level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement: Beginning Balance as of June 30, 2016 Net Realized and Unrealized Gains/(Losses) Transfers Into Level 3 Transfers (Out) of Level 3 Sales and Settlements Ending Balance as of June 30, 2017 Purchases investments: Equities... $ 1 $ 1 Fixed income... Corporate debt... 9 9 Other investments... 20,990 20,990 total investments... $ 21,000 $ $ $ $ $ $ 21,000 $ Changes in Unrealized Gains/(Losses) Relating to Investments Held as of June 30, 2017 All net realized and unrealized gains/(losses) in the tables above are reflected in the Statement of Activities. Net unrealized gains/(losses) relate to those investments held by the Museum for the years ended June 30, 2018 and 2017, respectively. The Museum s policy is to recognize transfers at the beginning of the year. There were no significant transfers during the years ended June 30, 2018 and June 30, 2017. 59

The following table lists investments carried at NAV by major investment category for the year ended June 30, 2018 (in thousands): investment strategy Fair Value Determined Using NAV Redemption Frequency/Notice Period (1) Under Lock-Up (2) In Side Pockets (3) Remaining Life Unfunded Commitments Equity funds... $ 682,786 Daily to Biennially (1 to 180 days) $ 103,497 $ 6,857 N/A N/A Hedge funds... 782,464 Monthly to Annually (30 to 90 days) 130,403 51,373 N/A N/A Private equity... 474,253 N/A N/A N/A 1 to 18 years 443,646 Real assets... 465,624 N/A N/A N/A 1 to 16 years 228,073 Fund of hedge funds held for capital projects... 188,498 Monthly (30 days) N/A N/A N/A N/A Total... $2,593,625 (1) In accordance with the underlying agreements with the investment managers, in addition to the redemption terms described above, there are additional redemption restrictions whereby the Museum s investment is redeemable over an extended period of time. (2) Under lock-up refers to the fact that certain of the Museum s investments either cannot currently be withdrawn or redemptions are currently subject to fees. As of June 30, 2018, current lock-ups expire between September 2018 and November 2020. (3) Investments in side pockets are generally illiquid and not currently available for redemption. 60

The following table lists investments carried at NAV by major investment category for the year ended June 30, 2017 (in thousands): investment strategy Fair Value Determined Using NAV Redemption Frequency/Notice Period (1) Under Lock-Up (2) In Side Pockets (3) Remaining Life Unfunded Commitments Equity funds... $ 685,038 Daily to Biennially (1 to 180 days) $ 86,455 $ 4,078 N/A N/A Hedge funds... 693,135 Monthly to Annually (30 to 90 days) 172,454 55,686 N/A N/A Private equity... 427,941 N/A N/A N/A 1 to 12 years 335,382 Real assets... 401,085 N/A N/A N/A 1 to 11 years 224,753 Fund of hedge funds held for capital projects... 180,154 Monthly (30 days) N/A N/A N/A N/A Total... $2,387,353 (1) In accordance with the underlying agreements with the investment managers, in addition to the redemption terms described above, there are additional redemption restrictions whereby the Museum s investment is redeemable over an extended period of time. (2) Under lock-up refers to the fact that certain of the Museum s investments either cannot currently be withdrawn or redemptions are currently subject to fees. As of June 30, 2018, current lock-ups expire between September 2018 and November 2020. (3) Investments in side pockets are generally illiquid and not currently available for redemption. As of June 30, 2018 and June 30, 2017, no fund investments were subject to suspended withdrawls (i.e. gates). Certain of the Museum s investment managers incorporate the use of financial instruments with off-balance sheet risk as part of their investment strategies primarily to hedge against equity, currency, or interest rate risk. The Museum, at times, transacts in futures contracts and forward foreign currency contracts primarily for managing foreign exchange risk and fluctuations in interest rates. Market risk represents the potential loss in value of financial instruments caused by movements in market factors including, but not limited to, market liquidity, investor sentiment, and foreign exchange rates. The Museum s investment portfolio consists of a number of relatively illiquid or thinly traded investments having a greater amount of market risk. These investments may trade in limited markets or have restrictions on resale or transfer and may not be able to be liquidated on demand if needed. The following table summarizes the unrealized gains and losses reported on derivative financial instruments for the years ended June 30 (in thousands): 2018 2017 Fair Value Unrealized Gain/(Loss) Fair Value Unrealized Gain/(Loss) Interest rate exchange agreements... $ (27,358) $ 7,284 $ (34,642) $ 14,076 61